Healthcare Town Hall

How will the Patient Protection and Affordable Care Act (PPACA) affect employer-sponsored health insurance? Employers have to consider whether they want to preserve their existing coverage, self-insure, or pay fines for suspending coverage. That decision may hinge on an employer’s ability to maintain affordable costs while offering minimum coverage.

Paul Houchens recently discussed affordability and PPACA’s minimum benefits compliance with Healthcare Payer News. Here is an excerpt from the article:

Across industries, the main challenge will be having minimum coverage and keeping it as affordable as possible…

Wellness benefits across corporate and small firms vary from tobacco cessation programs to on-site fitness centers, free produce and commuting perks. For ACA minimum benefits compliance, though, it’s still not clear how exactly the affordability test will be measured against wellness incentives, said Paul Houchens, an Indianapolis-based consulting actuary with Milliman.

“Let’s say you have a plan that charges $2,000 for single coverage without wellness incentives, but $1,000 if you’re a non-smoker. Is that affordability going to be measured based on the $2,000 or that $1,000? Particularly for employers with large wellness incentives in their plans, it’s difficult to do a lot of planning without having that information.”

More broadly than wellness, Houchens sees employers probing the value of their current sponsored insurance and calculating the costs and benefits of different options, as federal agencies finalize rules for the individual and employer mandate, premium assistance and eligibility.

If all of an employer’s workers are above 400 percent of the federal poverty level (FPL), Houchens said, “None of them are going to qualify for premium subsidies and probably in a lot of cases are going to be paying a lot more for health insurance under exchanges than they would under (their) plan.” Or “if you have an employer with dominantly low-income employees, maybe some would actually be better off in the exchange versus your employer plan.”

While the level and relative affordability of coverage will probably vary by industry and income, Houchens and colleagues think that the cost of dropping coverage is likely to outweigh the savings.

“Even for some of the low-income employers, I think a key point to remember is that your health insurance is a tax-deductible expense, whereas the penalties are not,” Houchens said. “That’s a huge difference for the for-profit companies. And also, you’re being penalized on every full-time employee. You’re not just being penalized on the people that would participate on your plans.”

A company with 60 percent health plan participation is “really only paying for health insurance for 60 percent of employees,” he said. “But with the exception of the 30 employee exemption, you would be paying a penalty on 100 percent of the full-time employees; that’s non-tax deductible. We’ve run the calculations for a number of employers. The math of terminating coverage and trying to make them whole, it simply doesn’t add out. So employers are thinking prudently. They’re probably going to continue to offer coverage in 2014.”

Download Milliman’s Healthcare Reform Strategic Impact Study which helps answer important reform questions employers are dealing with.

Also, for more of Paul’s insights on healthcare reform, follow him on Twitter @PaulHouchens.

Affordability, Reform Affordability, Cost, employers, Healthcare Reform, Paul Houchens

The Patient Protection and Affordable Care Act (PPACA) will introduce new marketplaces for individual and small group health insurance, effective January 1, 2014, in the form of public exchanges. Health insurance plans need to fully prepare for and understand the impact that the public exchanges may have on their business. Whether or not a health plan participates, the logjam that blocked reform progress for several months appears to have been cleared; PPACA is now moving forward with weekly releases of regulations and rules (most are preliminary rules and open for comments). This momentum of rule writing brings new terminology and issues to light, which are critical to understand before making decisions on whether or not to participate in the public exchanges.

This paper provides 10 critical considerations based on the preliminary rule recommendations published in the last half of November. As these rules are finalized, the considerations and market dynamics may change.

Reform Craig Keizur, Jill Van Den Bos, Margaret Chance, Paul Houchens, state exchange

This is from today’s Politico Pulse:

AN ACTUARIAL TWEET THAT CAUGHT OUR EYE – Paul Houchens, a consulting actuary at Milliman, tweeted that when a business went through a Milliman study of the health law’s impact, the “employer is no longer planning on terminating plan in 2014.” So we talked to Houchens by phone and he walked us through the decision-making of 10 unnamed clients — all of whom decided to stick with employer coverage, despite some new costs and the likelihood of higher uptake of coverage by employees. Their reasoning? The savings weren’t really all that great once all the tax implications were taken into account. For example, that $2,000-per-worker penalty (which is cheaper than covering a worker in many cases) is really closer to $3,500 once the underlying tax breaks for coverage are thrown into the mix. Plus, workers would be paying more — a lot more — to buy their own individual coverage, even if the employer shared some of the savings as a raise. “It would be huge loss in compensation and the math doesn’t add up,” Houchens told us.

You can read more about Milliman’s reform analysis for employers here.

Reform employers, Paul Houchens

In the ongoing debate over healthcare costs—and especially over the Patient Protection and Affordable Care Act (PPACA) mandates concerning medical loss ratios—it is interesting to revisit a 2011 Milliman report on the commercial health insurance market using financial and enrollment data from the “Supplemental Exhibit.” From the paper’s introduction:

What level of market competition exists in the current health insurance marketplace? Are administrative costs and underwriting margins in teh individual and small group markets significantly higher than in the large group market? How does claim cost experience vary between individual and small group markets?

In the past, these questions have been difficult to answer because insurance carrier financial experience was generally only reported on an aggregate basis rather than at the state level or for a specific segment of the commercial insurance market. Because of the introduction of a new financial exhibit that must be completed with each carrier’s year-end statutory filing, many of these questions can now be answered with greater clarity.

Some of the report’s interesting findings include:

• Significantly higher per member per month (PMPM) administrative costs for individual and small group markets
• Higher medical loss ratios for large group markets
• Market share is most concentrated in the large group market, with 44 states having five or fewer companies representing 90% of market share or more

 
The paper also covers the influence of rating rules on individual and small group premiums, showing how requirements for community rating affect claim cost ratios across different regulatory regimes.

Regulation Cost, Healthcare Reform, individual insurance market, large employers, medical loss ratios, Paul Houchens, small employers

The Patient Protection and Affordable Care Act attempts to balance the adverse selection inherent in its guaranteed issue approach by enforcing an individual mandate to purchase insurance. This individual mandate will be at the heart of the Supreme Court proceedings later this month.

Media coverage of insurance industry practices such as recission have made many Americans sympathetic to the idea of guaranteed issue without regard to preexisting conditions. But guaranteed issue without a mandate of some kind  may have some serious consequences.

So, how does the individual mandate in PPACA actually work, and how would it work in practice? Although the effects of any complex policy are difficult to predict, Milliman consultant Paul Houchens recently wrote a detailed treatment of the subject, Measuring the Strength of the Individual Mandate.

If the Supreme Court strikes down the individual mandate, there are other policy options that could potentially achieve similar results. These were collected in a report by the Government Accountability Office based on interviews with industry experts:

• Modify open enrollment periods and impose late enrollment penalties.
• Expand employers’ roles in autoenrolling and facilitating employees’ health insurance enrollment.
• Conduct a public education and outreach campaign.
• Provide broad access to personalized assistance for health coverage enrollment.
• Impose a tax to pay for uncompensated care.
• Allow greater variation in premium rates based on enrollee age.
• Condition the receipt of certain government services upon proof of health insurance coverage.
• Use health insurance agents and brokers differently.
• Require or encourage credit rating agencies to use health insurance status as a factor in determining credit ratings.

Reform Guaranteed issue, Healthcare Reform, individual mandate, Mandates, Paul Houchens, Regulations, Supreme Court

The uncertain fate of the Patient Protection and Affordable Care Act (PPACA), which is due to a Supreme Court challenge and the upcoming elections, is making 2012 an interesting year for states. While some healthcare stakeholders may be taking a wait-and-see approach, the clock continues to tick toward PPACA deadlines—as demonstrated with today’s release of exchange regulations.

A report recently released by the White House says that 28 states are making significant progress toward establishing exchanges. The National Conference of State Legislators shows on its updated web page that 12 states have passed legislation to establish exchanges. In all, according to The Commonwealth Fund, 28 states have received federal grants for the establishment of exchanges. On the other hand, many are waiting for more information, an action HHS Secretary Sebelius called “pretty appropriate” according to City & State, a newspaper that covers New York State politics.

So what will happen if the law is struck down in whole or in part by the Supreme Court? Two Milliman consultants, Michael Sturm and John Meerschaert, examined the issues in detail in a recent feature story.  They see several possible outcomes:

• The law is ruled wholly constitutional by the Supreme Court. While the authors see this as unlikely, it is possible. Even so, however, deadlines for implementation of exchanges would likely be delayed. States would not be out the dark yet, as the November elections could still have a significant impact on which provisions are implemented.
• Part or all of Title I is ruled unconstitutional by the Supreme Court. The most vulnerable part of the law is the trifecta of individual mandate, guaranteed issue, and prohibition of the ability to consider preexisting conditions. If these are eliminated, exchanges will most likely be used by healthier, less wealthy segments of the population as they will receive a subsidy. For more on the strength of the individual mandate, see this Milliman Research Report by Paul Houchens.
• Part or all of Title II is ruled unconstitutional. Due to precedent, this is unlikely, but if it happens, states will probably continue operating their current programs and the rise of managed care in Medicaid will continue.
• The entire law is struck down. This is also seen as unlikely. Even if this occurs, some states may go ahead with the establishment of exchanges.

Reform Healthcare Reform, John Meerschaert, Mike Sturm, Paul Houchens, Regulations

Kaiser zeroes in on key dynamics of the new Milliman report about the strength and weakness of the individual mandate, which we blogged about Tuesday. Of particular interest, the Kaiser coverage seizes on the key role that income level will pay in the efficacy of the mandate:

The report finds that “For households with income below 200% [Federal Poverty Level, or FPL], the individual mandate will provide high financial incentive for insurance participation, as remaining or becoming uninsured would be more costly than purchasing insurance…. For households with income between 200% and 300% FPL, the penalty amount becomes significantly smaller relative to out-of-pocket premium amounts because of the premium tax credit subsidy’s decreasing value. The influence of the individual mandate will be very strong for a portion of this income cohort, but less certain for households with income approaching 300% FPL, individuals, and the young.”

Reform individual mandate, Paul Houchens

Beginning in 2014, the individual health insurance market, with the exclusion of grandfathered plans, will require all policies to be guaranteed issue and community rated. The individual mandate is intended to reduce the degree of adverse selection that would otherwise occur in such an environment.

This paper focuses on the individual mandate’s penalties in relation to the expected out-of-pocket premium for bronze-level coverage in the individual market, which for individuals age 30 and older will be the least expensive qualified coverage available for purchase.

The relationship between the individual mandate penalty amounts and the bronze plan premium will vary significantly across different population segments and interacts with the following demographic and premium rating variables:

• Household income
• Age
• Family type

By modeling estimated penalty amounts relative to estimated out-of-pocket premium amounts, several conclusions can be made about the mandate’s impact. Insurance carriers, regulators, and state policymakers should take these considerations into account when trying to estimate the individual mandate’s impact on adverse selection, insurance participation, and insurance plan selection in the new individual insurance market.

Read the full paper here.

Reform individual mandate, Paul Houchens

What level of market competition exists in the current health insurance marketplace? Are administrative costs and underwriting margins in the individual and small group markets significantly higher than in the large group market? How does claim cost experience vary between the individual and small group markets?

In the past, these questions have been difficult to answer because insurance carrier financial experience was generally only reported on an aggregate basis rather than at the state level or for a specific segment of the commercial insurance market. Because of the introduction of a new financial exhibit that must be completed with each carrier’s year-end statutory filing, many of these questions can now be answered with greater clarity.

A new Milliman research report uses data reported in the Supplemental Health Exhibit (Part 1, Part 2, Part 3) for calendar year 2010 to focus on key premium, claim cost, and administrative statistics within each insurance market and discusses observed differences among them.

Click here to read the paper.

Reform admin, market share, Paul Houchens, Supplemental Health Exhibit

The Patient Protection and Affordable Care Act (PPACA) provides for an expansion of Medicaid eligibility for individuals who have an annual household income at or below 138% (including the 5% income exclusion) of the federal poverty level (FPL). Recent discussion has turned to individuals who may qualify for Medicaid even though their households have significant Social Security or Supplemental Security Income (SSI).

Using the 2009 American Community Survey (ACS) data published by the U.S. Census Bureau, this paper explores the potential number of individuals receiving Social Security or SSI and other family members within the household who may have been excluded from the Medicaid population expansion analyses because of the differences between defining household income under the public surveys and the modified adjusted gross income (MAGI). The MAGI methodology will be used to determine eligibility for Medicaid and exchange subsidies under the PPACA.

State-by-state results are provided in the appendices to this paper.

UPDATE: Here’s the Managed Care Online story on the analysis.

Reform Medicaid expansion, Paul Houchens, Rob Damler, Social Security